Rail Regulator’s end of term report on Network Rail brings taxpayers money-go-round

Published: 10th July 2014

Five yearly review of Network Rail’s performance ends in £53 million fine

The Office of Rail Regulation (ORR) has published its report on Control Period Four (CP4) which ran for five years from April 2009.

Network Rail (NR) is funded via a direct grant of around £10million a day (or over £3.5billion annually) made by Government for running and upgrading the UK’s rail network. In return for the funding, NR is obligated to deliver its promises signed off for CP4.

The ORR’s end of CP4 report says that NR's performance so far as enhancements were concerned was generally good, but the day to day operational performance was not good enough with too many infrastructure failures causing delays and cancellations.

Taxpayer funded fine?

This shortfall in performance will see NR return £53.1million to the Government as a fine and they will also spend millions on increasing network resilience. The ORR review highlighted some significant successes such as the major rail enhancement programme, delivered largely on time and budget.

Passengers benefited from 98 projects delivered on time out of 118 undertaken with only one scheme delivered late enough to cause disruption to passengers. The start of a massive electrification investment commenced in this review period.

But it is not only passengers that have gained from NR’s work. Freight services continued to increase and a significant investment in the UK freight network was made increasing capacity and reliability of freight services.

NR increased safety at levels crossings with over 800 crossings upgraded or closed reducing risk from errant road users. The overall rail industry is now carrying record numbers of passengers and freight services with over 1.5billion passenger journeys made in the 12 months up to April 2014, 300 million more than five years earlier. Freight on rail increased by 14 million tonnes in 2008-09 to 116.6 million tonnes in 2013-14.

Extreme weather bail-out

NR’s performance was hit last winter by flooding, high winds and landslides with many lines closed, such as at Dawlish. The ORR’s investigations into NR’s operational performance established important areas where NR was funded to, but did not meet its funded targets such as on long distance passenger services. NR’s target was to deliver average punctuality levels of 92% in this sector in 2013-14 but only achieved 86.9%.

This was due, said ORR, to NR not delivering its improvement plans combined with a lack of asset condition knowledge for its earthworks, electrical equipment and drainage. ORR, after making allowances for issues beyond NR's control, levied a fine on the company of £53.1m.

Third of a million trains delayed

London & South East (LSE) sector punctuality should have been 93% in 2013-14 but NR only managed 89.6% and as a result will spend £25million on improvements to the network.

The underperformance of NR on long distance and the LSE sectors was significant according to ORR even when factors outside NR’s control were included such as the extreme weather. So far as long distance services were concerned, ORR established that there were approximately 73,100 additional late trains over and above what there should have been given the funding available.

In the LSE area, there were, between 2009 and 2014, approximately 265,500 additional late trains over and above funded obligations. ORR hopes that the penalties imposed on NR will give a clear signal to NR management about delivering contracted performance levels.

Freight, regional and Scotland’s passengers

ORR also reported on the regional sector, Scotland and freight services with the regional sector 1% below the target but given the extreme weather, this was close enough to avoid a penalty.

In Scotland, NR was only 0.6% short of its funded target of 92% and again, ORR concluded that NR did everything they could have done to meet their targets. NR made many timetable planning errors in 2012-13 resulting in poor performance but ORR said NR had learnt from this.

Freight performance was below target but was seriously hindered by the extreme weather and the Hatfield Colliery landslip which closed a main freight artery for five months, so no penalty was thought appropriate for missing performance targets.

They said;

ORR Chief Executive Richard Price said: Network Rail has been successful in modernising and improving Britain's railways over the past five years, during a period which has seen record rise in passenger numbers.

Punctuality is important to passengers. Network Rail committed to improve train punctuality between 2009 and 2014, and was funded to do so. But it did not deliver its commitments for passengers who travel on long distance and London and South East services. Network Rail fell significantly short of punctuality for long distance services, so it is right that money is returned to funders. [The Government].

NR will be undertaking extensive maintenance and renewal work to improve punctuality on long distance services between 2014 and 2019. It has committed extra funds to improve the resilience of the rail network in London and the South East for better reliability of services in the future.

Network Rail's performance will continue to be under the spotlight. Network Rail has committed to deliver the basics in planning and managing the reliability of key components of the rail network such as bridges and earthworks.

The company has shown it can plan performance effectively and predict and prevent problems before they cause disruption – as demonstrated for the London 2012 Olympics – and it must repeat these standards across the entire network.

The company must do more to 'predict and prevent' problems on the network before they create disruption for passengers – enhanced asset management, planning and delivery of maintenance, renewal, and resilience works are vital.

And the Network Rail response…

Mark Carne, NR’s new chief executive said: “This is a time of unprecedented growth and record levels of investment in Britain’s railways. As a result, today we have the safest, most improved passenger railway in Europe.

“We accept that we have fallen short of the regulatory targets for train punctuality and that this is, in part, down to our failure to reduce infrastructure faults quickly enough. At the same time, the sharp increase in passenger demand has led us to run more trains at peak times, even when we know this will lead to a more congested railway and that punctuality may suffer.

“Passengers do want trains to run on time, but for many of them the more pressing priority is increased services with less crowding. The trade-off between congestion and punctuality is something we face every day. I am confident that by the end of this control period we will meet and indeed exceed the regulatory performance targets.”

Commenting on proposed improvements to mobile broadband internet access on the rail network, Mark Carne said: “The increasing availability of mobile broadband on trains will mean rail travel is an even more attractive option for many people as they can make better productive use of their journey time.

Money-go round and NR’s double whammy

It must not be forgotten that from September, NR becomes a Government department and the Department for Transport can order NR to accommodate more trains, as with the Virgin franchise extension. The ORR will approve the extra trains as it has a duty to promote the use of rail and they carry out this function very well.

But all these directions ultimately come from the same source, the Government, and they all have competing priorities and incentives so there is an argument that the fine is a taxpayers money-go round. It could also be argued that NR has already paid fines under the Track Access contracts, Schedule 8 to train operators whose trains it has delayed. So another fine levied by ORR puts NR in double jeopardy.

Then there are the estimated 400-500 staff who work solely on performance delay attribution which must cost the industry another £30million annually to employ – largely paid for by taxpayers.

Despite the foregoing, it is a fact that Great Britain also has officially both the most improved, and the safest railway in Europe, a great achievement.

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